ARM Holdings said demand for smartphones would pick up in the second half after a decline in the end to 2013 that resulted to a lower than expected first-quarter profit for the British company.

ARM has made an encouraging start to 2014 with a continued strong licensing performance. The company says its licensing opportunities remain healthy for Q2 and the rest of the year.

The semiconductor industry normally declines sequentially in the first quarter of the year. Market commentators generally regard the decline this year to have been similar to prior years, which will provide the context for ARM?s Q2 royalty revenues. But ARM says that indications from the semiconductor industry and its own customers suggest that ARM will benefit from an improving environment in the second half.

ARM's Chief Financial Officer Tim Score said there were signs that demand was picking up for smartphones from the low-end to the top, where Samsung has just launched its Galaxy S5 flagship and Apple is expected to unveil a new iPhone later this year.

The British company posted a 9 percent rise in pretax profit to 97.1 million pounds ($163.36 million), on revenue collected in dollars of $305.2 million, up 16 percent.

Royalty payments rose by an underlying 8 percent year on year, about a quarter of the growth it was seeing at the same time last year.

Taiwan Semiconductor Manufacturing Co Ltd (TSMC), the contract chip producer which drives more than half of ARM's processor royalties, said last week it was targeting record revenue in the second quarter.